Improving public sector productivity has rarely been easy, but implementing change in three areas could have a considerable impact.
Making government more productive offers substantial rewards for the public. A McKinsey study across 42 countries found that if public services could reach the productivity levels of the leading performers in their peer groups, the improvement would be worth an estimated $3.5 trillion per year.1 Since then, governments have spent more on public services, especially during the COVID-19 pandemic.2 Allowing for this increase and inflation, the productivity gap could be well over $5 trillion per year in 2024. These additional resources could be redirected to further improve public services, invested to meet longer-term needs (for example, those of aging populations), or used to tackle intensifying fiscal challenges.
Globally, governments have worked to become more productive. Yet, with some exceptions, productivity has continued to stagnate.3 In the public sector, productivity may be difficult to measure but generally includes improved operational efficiency and effectiveness.4 A decline in productivity puts pressure on government budgets and may prevent people from receiving the best possible outcomes from public services such as healthcare and education.
Of course, there have been many challenges to improving productivity, such as the global financial crisis, the pandemic, and the war in Ukraine. However, low productivity in the public sector is a long-term phenomenon stretching back at least three decades. In this article, we discuss a systematic approach to improving productivity by using three strategies that have been effective in both public and private sector organizations. While we point to specific examples from the United Kingdom and from the private sector, we suggest that the overall approach proposed here would apply to most public sector organizations.
Is the gap set to grow?
Public sector productivity in the United Kingdom, as in many countries, has been declining since 1995. According to our research, between 1995 and 2008, public sector productivity decreased by an average of 0.1 percent per year. Since the 2008 financial crisis, the decline has accelerated to 0.9 percent per year. Overall, public sector productivity has decreased by about 20 percent since 1995. In contrast, private sector productivity in the United Kingdom has increased by 50 percent over the same period, and in the United States, it has increased by 150 percent. The public has noticed this disparity. In a survey conducted in November 2023, 78 percent of respondents stated that public services had deteriorated.5
